Lectures in Macroeconomics- Charles W. Upton A Change in 

A Change in Tsi The Y and M Curves P r Y M PoPo roro

A Change in Tsi The Y Curve P r Y M PoPo roro Pick any point on the Y curve. D Y =S Y

A Change in Tsi The Y Curve P r Y M PoPo roro Does the event (e.g. people become more confident about the future) mean D Y >S Y or D Y <S Y ? D Y =S Y

A Change in Tsi The Y Curve P r Y M PoPo roro Suppose D Y >S Y. To get back on the Y curve, the Auctioneer would have to raise r or P. Thus Y curve shifts up and to the right. D Y =S Y

A Change in Tsi The M Curve P r Y M PoPo roro Pick any point on the M curve. D M =S M

A Change in Tsi The M Curve P r Y M PoPo roro Does the event (e.g. people become more confident about the future) mean D M >S M or D M <S M ? D M =S M

A Change in Tsi The M Curve P r Y M PoPo roro D M =S M Suppose D M >S M. To get back on the M curve, the Auctioneer would have to raise r or lower P. Thus M curve shifts down and to the right.

A Change in Tsi Some Problems Credit cards are outlawed –An increase in  Drugs are legalized –A decrease in 

A Change in Tsi A Change in  If credit cards are outlawed,  goes up. –More money is required as a replacement for credit cards.. P r Y M PoPo roro

A Change in Tsi A Change in  If credit cards are outlawed,  goes up. If drugs are legalized,  goes down. –Less money is required to avoid prosecution. P r Y M PoPo roro

A Change in Tsi A Change in  If credit cards are outlawed,  goes up. –More money is required as a replacement for credit cards.. If drugs are legalized,  goes down. –Less money is required to avoid prosecution. P r Y M PoPo roro We do one:  goes up.

A Change in Tsi A Change in  Pick a point on the Y curve. P r Y M PoPo roro

A Change in Tsi A Change in  Pick a point on the Y curve. D Y <S Y P r Y M PoPo roro

A Change in Tsi A Change in  Pick a point on the Y curve. D Y <S Y P r Y M PoPo roro

A Change in Tsi A Change in  Pick a point on the Y curve. D Y <S Y The Auctioneer must raise D Y P r Y M PoPo roro D Y <S Y

A Change in Tsi A Change in  Pick a point on the Y curve. D Y <S Y The Auctioneer must raise D Y P r Y M PoPo roro D Y <S Y Memo to the auctioneer: To cut D Y, raise r To raise D Y lower r

A Change in Tsi A Change in  Pick a point on the Y curve. D Y <S Y The Auctioneer must raise D Y P r Y M PoPo roro D Y <S Y

A Change in Tsi A Change in  Pick a point on the Y curve. D Y <S Y The Auctioneer must raise D Y The Y curve shifts down and to the left P r Y M PoPo roro D Y <S Y

A Change in Tsi A Change in  Pick a point on the M curve. P r Y M PoPo roro

A Change in Tsi A Change in  Pick a point on the M curve. D M >S M P r Y M PoPo roro The reduction in c is dominated by the increase in 

A Change in Tsi A Change in  Pick a point on the M curve. D M >S M The Auctioneer must lower D M P r Y M PoPo roro D M >S M

A Change in Tsi A Change in  Pick a point on the M curve. D M >S M The Auctioneer must lower D M P r Y M PoPo roro D M >S M Memo to the auctioneer: To cut D M, raise r To raise D M lower r

A Change in Tsi A Change in  Pick a point on the M curve. D M >S M The Auctioneer must lower D M P r Y M PoPo roro D M >S M

A Change in Tsi A Change in  Pick a point on the M curve. D M >S M The Auctioneer must lower D M The M curve shifts down and to the right P r Y M PoPo roro D M >S M

A Change in Tsi A Change in  The Y curve shifts down and to the left. The M curve shifts down and to right P r Y M PoPo roro

A Change in Tsi A Change in  The Y curve down and to the left. The M curve shifts down and to right P down Interest rate is uncertain. P r Y M PoPo roro

A Change in Tsi End ©2003 Charles W. Upton. All rights reserved